Why fintech is taking the finance world by storm

In the Autumn Budget, the Chancellor made provisions to support the further development of financial technology services. Financial technology (or FinTech) businesses are taking on traditional high street banks by developing innovative new ways for us to bank, save and invest money.

Britain is already home to two-fifths of Europe’s FinTech companies and additional investment will help to drive this forward even further. FinTech isn’t just popular with investors, 45 per cent of all women and 39 per cent of men in the UK use savings and investment FinTech services, such as Moneybox and Funding Circle. But, what is so appealing about FinTech and what does it mean for the future of financial services?

It’s easy to understand

The language the majority of fintech companies use means the services are accessible. Many FinTech start-ups use Plain English throughout their marketing and communications to break down the barriers that may have intimidated consumers previously. This is particularly the case with investment services. As consumers no longer have to puzzle out the jargon associated with investments and stocks, it’s an immediately appealing and accessible way to make money.

Companies like Nutmeg are transparent and explain complex topics clearly. In fact, the company was founded as a result of frustration over the perceived exclusivity of investment banking. All of the terminology Nutmeg uses is immediately clarified and explained so it’s easy to follow and not intimidating for first time investors.

Using data for a personal experience

Many FinTech companies use data to provide a personalised, and therefore richer, experience for customers. This takes many forms but is mostly used to help consumers better manage their money.

Monzo describes itself as the ‘bank of the future’ and is built exclusively for smartphones. As such, consumers can literally manage their money at the tap of a button. Monzo generates spending reports that intelligently categorises user’s purchases by location, retailer and type. It also lets users set budgets to better manage their money and the app is instantly updated so users can see exactly how much money is left in their account.

FinTech also uses data to help consumers plan and manage their futures. Fintech credit checking companies like ClearScore and Noddle use data to recommend loans, credit cards and mortgages as well as providing advice on improving credit scores. They also display products that customers are guaranteed to be approved for, or even pre-approved. This helps minimise the negative impact on credit ratings and ultimately improve the customer’s finances.

Encouraging saving

In the last quarter of 2016, the average household saved just 3.3% of its post-tax income. That’s the lowest rate of savings since the 1960s. FinTech companies are hoping to change this. Algorithms and artificial intelligence (AI) help to make saving second nature. Apps like Chip and Plum calculate how much you can afford to save based on your expenditure and squirrel it away into an account, before you even notice it’s gone.

Some apps go one step further and try to build up your savings. Moneybox not only makes saving easy, but it also invests your funds into a portfolio of your choice. Every time you make a purchase on your debit card, Money Box rounds it up to the nearest pound and invests the difference into your portfolio. Users can choose from cautious, balanced or adventurous portfolios and simply have to keep spending to (hopefully!) keep their savings growing.

The future of FinTech

Many of the FinTech products available today are built on AI and intelligent insights. As we begin to further develop AI and its capabilities, FinTech and the way we manage our money will only become more sophisticated.

This is already coming to the fore as intelligent chatbots are utilised for a number of apps. Cleo integrates within Facebook messenger and chats to users in a friendly, conversational way. Cleo provides bitesize snippets of information about your spending habits and compares them against other users’. As the app can be texted or chatted to directly through Facebook, there’s no need to remember any extra passwords.

Ultimately, it seems that fintech is helping the general population access and interact with their finances in a brand new, accessible and transparent way.